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Zoom Webinar: Q/A: Breaking Into the Cannabis Industry with Cannaspire

Writer's picture: Carpfish CreativeCarpfish Creative



This Zoom meetup provides a comprehensive open Q&A web-based discussion for Minnesota cannabis entrepreneurs to gain a better understanding and manage risks specific to cannabis facilities. From security, government regulations (as of now), and location selection, even a few tips and tricks.


Panel:


AI Zoom Recap

The meeting discussed the challenges and opportunities in Minnesota's cannabis industry, including the new rules coming into effect and the potential for a large number of applicants. The importance of location, personnel development, financial forecasting, and partnerships in the industry was also emphasized. Concerns were raised about the 70% rule, the potential for license holders' information to be made public, and the challenges of compliance and fines.


Some next steps discussed...

  • Attendees to contact their municipal officials to understand local regulations and fees for cannabis businesses.

  • Interested applicants to prepare application materials, including business plans and financial projections, ahead of the February-March licensing window.

  • Potential licensees to consider partnerships with other operators to differentiate their products in the market.

  • Applicants to research and select cannabis-friendly banks for their business accounts.

  • Interested parties to review the 122-page draft regulations and provide feedback on the state website by February 12th.

  • Potential cultivators to evaluate options for indoor/outdoor cultivation based on the new 10,000 sq ft allowance for microbusinesses.

  • Manufacturers to assess product strategies in light of the 70% THC cap rule.

  • Attendees to review follow-up materials provided by Matt, including links to zoning information, salary overviews, and state feedback portals.


Summary

The meeting proceeded with Warren, the chief compliance officer at Cannaspire, presenting an overview of their work and the Minnesota market. Carpfish moderated the meeting, encouraging participants to ask questions and address them as they arose. The meeting was set to discuss the new rules coming into effect on Monday and the potential for a large number of applicants in the coming month.


Minnesota Cannabis Industry Opportunities Warren, a consultant for cannabis businesses, discussed the opportunities and challenges in Minnesota's cannabis industry. He explained the different license types available, including retail dispensary, cultivation, wholesale transporter, and event organizer licenses. He highlighted the changes in the micro business regulations, which now may allow for 10,000 square feet of indoor and outdoor cultivation. He also discussed the potential for consumption lounges and the cannabis event organizer license, which allows on-site consumption with municipal approval. Warren emphasized the unique low overhead, and high revenue opportunities in the Minnesota market, such as farmers markets, grower competitions, and food trucks. He also mentioned the vertical license, which allows for 15,000 square feet of indoor canopy or one acre of outdoor cultivation, up to three retail locations, and the ability to manufacture hemp, adult use, and medical products within the state. Minnesota Cannabis Licensing Process Warren discussed the upcoming Minnesota cannabis licensing process, which is expected to begin once the new draft regulations are finalized. He highlighted the potential for cannabis grower grants and the importance of a well-prepared application, including an abbreviated business plan, capitalization table, security plan, and operational plan. He also noted that the application process will be a general lottery, with over 260 applicants rejected in the first round of social equity licenses.


Warren's team, Cannaspire, successfully handled all 15 applications in the first social equity round, with all accepted. The timeline for the 2025 licensing cycle was also discussed, with the deadline to request a refund for the social equity round already passed. Location, Partnerships, and Business Planning Warren discussed the importance of location for businesses, particularly dispensaries, in Minnesota. He noted that the average dispensary nationally makes about $2 to $2.5 million, but this can vary greatly depending on location. He advised all attendees to make contact with municipal management to understand how many licenses will be given out and what the municipality's stance is on the number of dispensaries per 12,500 people. Warren also emphasized the importance of knowing one's partners and having a business plan. He suggested that attendees start contacting their municipalities to sway decisions at city council meetings. He also highlighted the need for facility development, cost management, and realistic timelines. Lastly, he stressed the importance of personnel development and establishing an org chart.


Key Competencies in Cultivation and Market

Warren discussed the importance of understanding key competencies in cultivation, such as the role of a master grower or director of cultivation. He also presented a sample personnel chart for a small manufacturing company and a pro forma startup requirement for a New Jersey-based clean room manufacturing facility. Warren emphasized the need to consider operating expenses, such as plant tags, seed to sale tracking software, RFID scanners, and employee training. He also highlighted the importance of knowing the market, including the number of people in the municipality, the distance to the nearest town that opted in, and the key business partners for the license type. Warren concluded by stressing the importance of a profitable business with a profitable pro forma, using an actual dispensary in New Jersey as an example. Securing Business License and Funding Warren emphasized the importance of having a solid financial forecast and business plan for investors and the state. He also highlighted the need for a realistic projection and seeking funding or help. Warren suggested working with an experienced person to obtain a business license quickly and avoid corrections. He also advised applying early to avoid website congestion and potential delays. Patrick confirmed this advice and asked if there was an advantage to applying early in the window. Warren agreed, stating that the sooner one applies, the sooner they can get reviewed and deal with any corrections or additional requests from the state.


Q: Minnesota's 70% Rule and Manufacturing/Testing. Carpfish raised concerns about the 70% rule in the context of Minnesota's business environment, particularly in manufacturing. Warren explained that the rule is problematic because it limits the amount of manufactured goods that can be produced, especially for distillate extraction which often exceeds 90% THC. He suggested that the rule might be revised before finalization. Patrick added that Ohio has a similar rule and it's unclear whether it applies to all processes or just the final product.


Q: Aaron asked about the benefits of reapplying for a social equity round after being denied, to which Patrick responded that it might be beneficial to reapply rather than going for a general license. Capped License Value and Adjustments Warren and Patrick discussed the potential value of obtaining a capped license for a cannabis business. Warren suggested that having a capped license could increase the perceived value of a company, making it more attractive to investors. He also advised Aaron, who was pursuing a micro business license, to consider the general licensing round instead of re-verifying for social equity due to the time and effort involved. Warren also clarified that if a company raises more funds in the future, adjustments to the cap can be made, but this would depend on the legal structure of the deal.


Q: Carpfish raised a question about the specifications for a combination of indoor and outdoor grow, which was left unanswered. Cannabis Cultivation Strategies and Challenges Warren discussed the limitations and potential strategies for cannabis cultivation in different states, particularly New York and Minnesota. He suggested that states might allow only one type of cultivation at a time, with the possibility of transitioning between outdoor and indoor cultivation. He also mentioned the challenges of product delays and the potential for medical licensees to dominate the market in Minnesota. Carpfish added that there is a period for public feedback on the rules until February 12th, and encouraged people to use this opportunity to formulate responses.


Cannabis Industry Partnerships and Challenges

Warren discussed the importance of partnerships and unique selling points in the cannabis industry, emphasizing the need for boutique micro businesses to stand out from larger operators. He also highlighted the challenges faced by reservations in the industry, such as compliance with state regulations. Patrick addressed questions about product volume and the potential for license holders' information to be made public. Warren and Carpfish agreed on the importance of maintaining quality and niche markets in the industry. The conversation ended with a discussion on the number of potential applicants for licenses and the importance of checking with municipalities for local rules and fees. Minnesota Cannabis Banking and Rules The meeting discussed banking options and requirements for cannabis businesses in Minnesota. Warren advised looking into fees, and requirements like providing a website and business plan to banks and building a relationship with the banker. He mentioned challenges around federal regulations like IRS reporting. Carpfish noted the recent release of rules by the state regulator, which expanded security requirements but lacked details on payments and payroll. There is frustration that the final rules will come after the application window closes. The THC potency limit of 70% is concerning for some manufacturers dealing in vape products. The two major medical manufacturers just announced expansion plans, positioning them well for the new market.


Cannabis Operators, Compliance, and Equity Carpfish and Patrick discussed the importance of forming a community for cannabis operators, drawing from their experiences in Missouri. They also discussed the challenges of compliance and

fines, emphasizing the need for clear rules. Patrick expressed concern about the 70% rule in Ohio and its potential impact on Minnesota's draft rules. Carpfish mentioned the phased rollout of equity and the potential impact on farmers. They also discussed the complexity of the rules, with Carpfish noting that the state site allows for public feedback. The conversation ended with Carpfish offering to provide links to relevant information and resources, and the attendees expressing gratitude for the session.

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